The idea of long-term investing has become confused with lazy and apathetic investing, Cramer said Wednesday. And you might not be adequately prepared for retirement, your kids’ college tuition or buying a new home if you don’t keep a watchful eye on your portfolio.
A lot of people think they can simply own a basket of stocks and forget about them. They embrace the idea of “buy and hold,” the investing strategy championed by none other than Warren Buffett, which says that any losses incurred in the short term eventually will be made up in the future. But if there’s one thing the crash of 2008 taught us, it’s that the opposite is true. Lack of vigilance can put a huge dent in your portfolio.
So, “buy and hold is dead,” Cramer said, because “it’s an easy way to lose, not make, money.”
But that doesn’t mean long-term investing is dead. In fact, the two are entirely different things —the former is passive, while the latter is active. And people who actively manage their money stand a much better chance of building sustainable wealth for themselves and their families.
How do you take control of your portfolio? Do the homework. Read the Securities and Exchange Commission filings, review the quarterly reports and pay close attention to company conference calls. And rather than simply buying and forgetting, look for stocks that work for 18 months or more, depending on your goals. Then monitor them constantly, looking for any change that affects the reasons why you bought them in the first place. If your thesis isn’t working anymore, then it’s time to take profits.
(Written by Tom Brennan; Edited by Drew Sandholm)